Mutual Fund Inflows Increase Significantly in 2018: BNY Mellon’s Pershing

According to the Pershing Asset Flows Barometer, launched today by BNY Mellon’s Pershing (Pershing), net inflows to mutual funds on the Pershing platform reached $8 billion in the first quarter of 2018, a 68 percent increase compared to the same period in 2017, pointing to a renewed interest among financial professionals in mutual funds.

Pershing Asset Flows Barometer takes a holistic look at how advisors have steered their clients’ investments over the past year, and identifies relevant trends. The data is compiled from 1,400 Pershing clients, 28.7 million individual positions, $650 billion exchange-traded-funds (ETFs) and mutual fund assets under custody.

Mutual funds make a comeback, while growth in ETFs slow down

As financial professionals turned toward more active investment strategies in the first quarter of 2018, ETFs experienced a slight slowdown.

Inflows into ETFs on the Pershing platform were at $6.2 billion in the first quarter of 2018, a decrease of about 14 percent compared to the prior year when ETF inflows were at $7.2 billion.

“While ETFs enjoyed banner growth over the past few years, mutual fund allocations have made a comeback since the beginning of 2018, largely due to increased volatility in the markets,” said Justin Fay, director of financial solutions, responsible for alternative investments and ETFs at BNY Mellon’s Pershing. “As advisors look to diversify their investment strategies to actively manage against emerging risks in the market, we are starting to see mutual fund inflows close the gap with ETFs.”

Over the past 12 months, ending March 31, 2018, ETFs on the Pershing platform experienced a net inflow of $29.5 billion, an increase of 25 percent from the same period prior year. Meanwhile, mutual funds had a net inflow of $22.7 billion during the same period, which is four times higher than the prior 12 months.

Further, assets on Pershing’s no-transaction-fee ETF platform, FundVest® ETF, which launched in June 2017, exceeded $1.8 billion as of the first quarter of 2018.

Institutional shares gain in popularity; triple zero shares see slower adoption

Almost all of the $8 billion inflows into mutual funds in the first quarter of 2018 went into institutional shares, which usually have the lowest expense ratio of all share classes and typically don’t require sales charges. There are more than 3,000 institutional shares trading on FundVest®, Pershing’s no-transaction-fee mutual fund platform.

“The trend toward lower cost share classes continues despite the uncertainty in the regulatory environment,” said Rich Calvario, director of investment solutions at BNY Mellon’s Pershing. “This is no surprise given that financial professionals have been working for some time to reduce conflicts of interest related to their product choices. As such, we have seen inflows to the institutional shares come at the expense of other, commission-based share types.”

In the 12 months ending March 31, 2018, outflows from A, B, C, and retail no-load shares have exceeded $10 billion.

Further, while the industry has scrambled to add so-called “clean,” or triple zero, shares to platforms in anticipation of the Department of Labor’s (DOL) now-scuttled fiduciary rule, “advisors have not been quick to adopt these products,” according to Calvario.

Pershing has added 1,400 triple zero share class funds to its platform since January 2017. However, as of the first quarter of 2018, assets in these funds totaled up to less than 2 percent of mutual funds custodied at Pershing.

“The SEC’s definition of clean shares and the uncertainty around the DOL fiduciary rule have left advisors content with choosing institutional shares as a viable product choice for the time being,” added Calvario. “That said, despite the slow adoption so far, it is not unusual for new share classes to take many years before achieving broad adoption. So the jury is still out on triple zero shares.

“At Pershing, our priority is to help our clients realize their business and investment goals. We do that by providing them with one of the broadest selection of products and solutions at the most competitive levels. As some of our competitors turn more toward proprietary solutions, we offer the benefit of an open platform, supported by our holistic wealth management capabilities,” concluded Calvario.

About BNY Mellon’s Pershing

BNY Mellon’s Pershing and its affiliates provide advisors, broker-dealers, family offices, hedge fund and ’40 Act fund managers, registered investment advisor firms and wealth managers with a broad suite of global financial business solutions. Many of the world’s most sophisticated and successful financial services firms rely on Pershing for clearing and custody, investment and retirement solutions, technology, enterprise data management, trading services, prime brokerage and business consulting. Pershing helps clients improve profitability and drive growth, create capacity and efficiency, attract and retain talent, and manage risk and regulation. With a network of 23 offices worldwide, Pershing provides business-to-business solutions to clients representing approximately 7 million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Additional information is available on pershing.com, or follow us on Twitter @Pershing.

According to the Pershing Asset Flows Barometer, launched today by BNY Mellon’s Pershing (Pershing), net inflows to mutual funds on the Pershing platform reached $8 billion in the first quarter of 2018, a 68 percent increase compared to the same period in 2017, pointing to a renewed interest among financial professionals in mutual funds.

Pershing Asset Flows Barometer takes a holistic look at how advisors have steered their clients’ investments over the past year, and identifies relevant trends. The data is compiled from 1,400 Pershing clients, 28.7 million individual positions, $650 billion exchange-traded-funds (ETFs) and mutual fund assets under custody.

Mutual funds make a comeback, while growth in ETFs slow down

As financial professionals turned toward more active investment strategies in the first quarter of 2018, ETFs experienced a slight slowdown.

Inflows into ETFs on the Pershing platform were at $6.2 billion in the first quarter of 2018, a decrease of about 14 percent compared to the prior year when ETF inflows were at $7.2 billion.

“While ETFs enjoyed banner growth over the past few years, mutual fund allocations have made a comeback since the beginning of 2018, largely due to increased volatility in the markets,” said Justin Fay, director of financial solutions, responsible for alternative investments and ETFs at BNY Mellon’s Pershing. “As advisors look to diversify their investment strategies to actively manage against emerging risks in the market, we are starting to see mutual fund inflows close the gap with ETFs.”

Over the past 12 months, ending March 31, 2018, ETFs on the Pershing platform experienced a net inflow of $29.5 billion, an increase of 25 percent from the same period prior year. Meanwhile, mutual funds had a net inflow of $22.7 billion during the same period, which is four times higher than the prior 12 months.

Further, assets on Pershing’s no-transaction-fee ETF platform, FundVest® ETF, which launched in June 2017, exceeded $1.8 billion as of the first quarter of 2018.

Institutional shares gain in popularity; triple zero shares see slower adoption

Almost all of the $8 billion inflows into mutual funds in the first quarter of 2018 went into institutional shares, which usually have the lowest expense ratio of all share classes and typically don’t require sales charges. There are more than 3,000 institutional shares trading on FundVest®, Pershing’s no-transaction-fee mutual fund platform.

“The trend toward lower cost share classes continues despite the uncertainty in the regulatory environment,” said Rich Calvario, director of investment solutions at BNY Mellon’s Pershing. “This is no surprise given that financial professionals have been working for some time to reduce conflicts of interest related to their product choices. As such, we have seen inflows to the institutional shares come at the expense of other, commission-based share types.”

In the 12 months ending March 31, 2018, outflows from A, B, C, and retail no-load shares have exceeded $10 billion.

Further, while the industry has scrambled to add so-called “clean,” or triple zero, shares to platforms in anticipation of the Department of Labor’s (DOL) now-scuttled fiduciary rule, “advisors have not been quick to adopt these products,” according to Calvario.

Pershing has added 1,400 triple zero share class funds to its platform since January 2017. However, as of the first quarter of 2018, assets in these funds totaled up to less than 2 percent of mutual funds custodied at Pershing.

“The SEC’s definition of clean shares and the uncertainty around the DOL fiduciary rule have left advisors content with choosing institutional shares as a viable product choice for the time being,” added Calvario. “That said, despite the slow adoption so far, it is not unusual for new share classes to take many years before achieving broad adoption. So the jury is still out on triple zero shares.

“At Pershing, our priority is to help our clients realize their business and investment goals. We do that by providing them with one of the broadest selection of products and solutions at the most competitive levels. As some of our competitors turn more toward proprietary solutions, we offer the benefit of an open platform, supported by our holistic wealth management capabilities,” concluded Calvario.

About BNY Mellon’s Pershing

BNY Mellon’s Pershing and its affiliates provide advisors, broker-dealers, family offices, hedge fund and ’40 Act fund managers, registered investment advisor firms and wealth managers with a broad suite of global financial business solutions. Many of the world’s most sophisticated and successful financial services firms rely on Pershing for clearing and custody, investment and retirement solutions, technology, enterprise data management, trading services, prime brokerage and business consulting. Pershing helps clients improve profitability and drive growth, create capacity and efficiency, attract and retain talent, and manage risk and regulation. With a network of 23 offices worldwide, Pershing provides business-to-business solutions to clients representing approximately 7 million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Additional information is available on pershing.com, or follow us on Twitter @Pershing.